The CEO of Quincy Newspapers Inc. says that after 115 years in newspapering and nearly 60 in broadcasting the family-owned company is undaunted by the new media and would like more of the old.
Quincy Newspapers CEO Tom Oakley is not fazed by the prospect of having to reinvent TV broadcasting in the digital age. After all, he and other members of his family helped invent it the first place, and that wasn’t so easy.
The family, whose media roots go back to its purchase of what would become the Quincy [Ill.] Herald-Whig in 1891, were broadcast pioneers, putting an FM station and WGEM-TV on the air in Quincy in 1947 and 1953, respectively.
A member of the fourth generation of the family active in media, Oakley says it took until 1960 for the broadcasting operation to break even and he serves up that fact as a lesson to those expecting “instant success and immediate turnarounds” in new media.
Over the past 30 years, the family-owned Quincy Newspapers Inc. has been slowly accumulating small-market TV stations and now has a string of 13, including a station it manages as a duopoly in Rochester, Minn. (DMA 153). The most recent purchase came just this year—KWWL, the NBC affiliate in Cedar Rapids-Waterloo, Iowa (DMA 89).
Quincy is the smallest market (DMA 171) in which the company operates, but it is still headquarters and it supports the company’s only newspaper-TV combo. The company’s largest market in Madison, Wis. (DMA 85), where it owns the ABC affiliate, WKOW.
In this edited interview with TVNewsCheck Editor Harry A. Jessell, Oakley says he is interested in buying more TV stations, especially ones that could be operated in tandem with existing stations as duopolies, and more newspapers within the footprints of its existing TV stations. But, as he knows well, to do that, he will need the FCC to relax its ownership restrictions.
Oakley also discusses Web sites, HDTV, must carry, the cyclical nature of the business and new technologies. Coming through all the talk is his determination to leave a thriving business to the fifth generation ÃƒÂ¢Ã¢â€šÂ¬Ã‚Â¦ and the sixth.
You have a NBC-Fox duopoly is Rochester. Would you like to have more?
We certainly look at other duopoly opportunities. We tried very hard to buy WNDU in South Bend [Ind.] where we own WSJV. We would’ve definitely figured out some kind of a way to operate WSJV under different ownership. There are economies to be achieved. [Editor’s note: Gray Television outbid Quincy for WNDU, agreeing to pay $85 million.]
Look at Rochester. In 2001, we bought Shockley Communications, which had several ABC affiliates in Wisconsin. But it also owned the Fox affiliate in Rochester, which was built to compete with our KTTC there. We had to figure out a way to handle that. Terry Shockley personally took ownership of that station so we could operate it under the KTTC umbrella. [Editor’s note: KXLT is now owned by Sagamore Hill Broadcasting, but still managed by KTTC.]
The truth of the matter is that a Fox station—or any fourth station in a market that size—is not viable, or if it is viable, it’s barely viable. It’s probably not able to do news. It’s probably not able to be the kind of broadcaster we are in the markets that we serve. The only way for that to occur is to greatly lessen the overhead. What we’ve been able to do in Rochester—and it’s taken us a long time to do it—is achieve a minimal margin that we feel comfortable with.
So, you need duopolies for fourth stations to work in markets as small as Rochester [DMA 153]?
We’ve looked at a number of stations in a number of our smaller markets and in almost all cases, the people want more money then we can justify. But the answer to your question is that there is no way for them to be profitable or, if they are profitable, they are so minimally profitable that their return on investments is going to be negligible.
You’ve indicated that you are in the market for additional stations. Anything imminent?
I’m not going to comment.
There are a lot of stations out there right now.
Well, there are all of a sudden, and we’ve had excellent banking relationships and wonderful support. We have a syndication group that helped us fund the Shockley purchase in 2001 and helped us fund the [KWWL] Cedar Rapids-Waterloo purchase this year.
When the government imposed the broadcast-newspaper crossownership ban, many existing crossownership situations, including yours in Quincy, were grandfathered. Has that been a competitive advantage to you over the years?
I don’t know how you would describe advantage or disadvantage. Clearly, we are able to use our news staff to do news on radio and on television. We do have some synergies that work between newspaper and broadcast. However, it’s interesting that in almost every market that we operate in we have a very close relationship with the competitive local newspaper. We share news, we share promotion and we actually work very closely together on community events.
We have strong relationships with a number of lead newspapers across the Midwest. We have a very strong relationship with the Gannett paper in Rockford where we operate Channel 13 NBC even though we’re competitors.
If the government did away with the crossownership ban, do you think you would be buying newspapers where you have broadcast stations?
I’ve been a strong proponent for removing the newspaper crossownership rules. I actually chaired the committee of the NAA advocating that those rules be changed and, of course, they weren’t changed and they’re still not changed, even though we thought many times we were pretty close.
Would we buy? Yes. There are numbers of instances where it would make sense. The rule today says that we can’t own a television station in our Grade A coverage area. Well, in some of these DMAs, there’s giant real estate involved. There are newspapers out in that region that clearly we would consider buying if that rule didn’t exist.
Do you see the entry of private equity firms into the business as good or bad?
I don’t know if it’s a good thing or a bad thing. We are definitely broadcasters and that’s a little different really than people who are in the business to make some money and get out. We’ve sold only one thing in all these lo and many years since 1891. So, fundamentally, we are here for the long haul.
What’s the outlook for the business? What the next big thing?
I don’t know about the next big thing. The outlook is we’re going continue to do what we’re doing. We may not enjoy the growth rate that we enjoyed in the past, but I don’t see the fundamental television business being threatened. I don’t think it’s going to go away. I think it’s going to be one of the principal methods of distributing entertainment and information and advertising going into the future. Most television stations are very high margin businesses and always have been. So how good is good? Well, is 45% or 42% or 38% or 35% good?
We’re going to look for opportunities for additional income streams. We’re going to work very hard in new media. I think we’re going to be involved in the Internet and cellphones and distribution techniques, some of which I’m sure we haven’t even dreamed up yet. I think that our ability to generate and distribute local content gives us a pretty significant leg up on other people because, basically, most of what we do is local.
Let’s talk about Web sites. I noticed that the new station you bought this year, KWWL, is an affiliate of WorldNow, but that the rest of your sites were developed in house. Is that your strategy—to keep Web development in house?
Yes it is. We have a director of new media who I think is doing a very good job. We’re considering a number of, I guess they refer to them as verticals, which will be a part of our Web sites. We have streaming video on all of them.
What do you mean by a vertical?
That may not be the technically correct description. Weather is an example. We will probably partner with Weather Central to put in a very upscale weather extension on all our Web sites.
Well, according to my Web site, you have 802 days, 7 hours, 49 minutes and 28 seconds to complete the transition to digital. How is it going?
Yeah, I saw your Web site. I saw that counting down. One of the things that’s of a significant concern to the broadcast community is really how this transition to digital is going to occur. There are many technical issues. They’re really very scary as we get up to February of 2009 in terms of turning off the analog signal and turning on the digital signal. There are a lot of concerns.
I think about how cable companies are going to distribute our 16-by-9 signal to 4-by-3 television sets because, clearly, many people are going to continue to have their analog sets with the cable box for a long time.
In addition to that, the idea of how you actually turn off the analog transmitter and turn on the digital transmitter—especially if you’re on the same channel—is a problem. That very likely is going to take some significant period of time with everybody in the country doing it at the same time. There’s the likelihood that television stations are going have to be dark in this transition period. I know MSTV is very concerned about a lot of this.
What about local HD production?
From a technical standpoint, we’ve invested a significant amount of money in the ability to distribute digital signals and whatever, and there’s obviously going to be a significant additional investment in order for us to originate HD programming.
How quickly can you do that?
I don’t know just what the number is per station. Listen, we invest significantly in our properties, we have state-of-the-art properties and we put our money where our mouth is. We’re here for the long term, so we’re not cutting corners or getting by as many people are. But it is not going to be an easy task for us to have all 13 stations originating. I would say that we will probably not have it done by 2009.
There’s nothing that says you have to.
I know that, except that obviously you would like to have it all done. What we’re doing essentially in many of our properties is, as our analog stuff wears out, we’re replacing it with digital stuff that we can use to broadcast HD. So that’s part of it, but it will have to be a much more aggressive program than that.
When do you think your first station will produce HD?
Oh, I think in a relatively short time.
Sometime in 2007 maybe?
Oh, yeah. If not, then in early 2008. Two thousand and seven is going to be sort of a tough year. It used to be, for many years, you had this up year in the political year, then maybe you had less growth in the odd year and then it got to be flat. Now realistically with the amount of political, it’s a down year. It’s very difficult in these markets that have a very significant political to equal that revenue in the next year, especially in a year when the GNP is looking at 2% or so growth.
How important is must carry to you, to the industry?
Listen, free over-the-air television is a tremendous business. I mean it’s a tremendous thing. You ask most young people about over-the-air television and they don’t have a clue. They spend their entire lifetimes getting a picture over a wire. They don’t have an idea that you can put an antenna on top of a television set and see something. Here, I happen to watch digital in Quincy over the air. What a tremendous picture, not degraded in any way by a cable system or a satellite 22,000 miles in the air. It is absolutely crystal clear, beautiful, fantastic picture. Most anybody that has a digital set today could put an antenna up, and a very small one at that, and watch over the air.
So are you saying that maybe you don’t need must carry?
No. I’m not saying that. I’m saying, yeah, we need must carry, absolutely we do. Essentially, we have one revenue source. So the more distribution channels we can get, the more capacity we have for delivering audience and the more it is going to be good for us.
So, it was a setback for the industry when the FCC failed to move ahead with must carry?
Yes it was. I’ve been actively involved in NAB for many, many years, including two on the board and I’m involved with TARPAC and I work hard from an industry standpoint.
Are you happy with where the NAB is these days?
[President] David Rehr looks to me like he’s going be a very strong leader. I obviously spent most of my life under Eddie Fritts and a bunch of his predecessors, but I think Dave’s going be very good.
With a ton of presidential candidates out there already, Iowa may not be such a bad place to be in 2007.
Iowa’s going to be a good place. You know, it’s funny. When [Iowa Senator Tom] Harkin ran [in 1992] it scared all the Democrats out of Iowa. But I don’t think [Iowa Governor Tom] Vilsack will scare too many people out. With the Republican field, it ought to be huge. [Editor’s note: Vilsack declared his candidacy for the Democratic presidential nomination in November.]
And a lot of that is 2007 money, right?
It will certainly start in 2007 and it could start fairly early in 2007 as a matter a fact. The Cedar Rapids-Waterloo market is going be a great market to be in and Sioux City will be a great market to be in. Of course, we also cover the Northern counties [of Iowa] from Rochester and several of the Southeast counties from Quincy.
Most of your stations are clustered in the central and upper Midwest. Does that have you looking at hubbing or centralcasting?
We do we have a centralized traffic facility in Quincy that supplies a very significant amount of services to each of our stations. We have a traffic system in our company—OSi as a matter a fact—that allows us with our wide area network to do all of our logs in Quincy. We have a station court here in Quincy that works with each of the stations so all of our traffic facilities are centralized. In addition to that, all of the billing is done here, all of the accounts receivable are processed here.
What about actual video distribution from a central hub?
All of the big video is local at this point. However, we do have several situations where we monitor control rooms from another location.